Michigan’s auto insurance landscape has seen significant shifts in recent years, with insurers grappling with the legal and financial impacts of the 2019 auto insurance reform law. Recently, a new lawsuit filed on September 20 in the Court of Claims by 13 Michigan auto insurance companies has brought further attention to the complexity of this legislation. Insurers need to know about the lawsuit and its potential implications.

Overview of the Legal Dispute

The central issue in this lawsuit revolves around a 2023 Michigan Supreme Court ruling invalidating the retroactive application of certain provisions from the 2019 changes to the auto insurance law. The court’s decision specifically focused on two subsections, including:

• A 47.5% reduction in reimbursements for non-Medicare-covered care.

• The 56-hour-per-week limit on family-provided attendant care.

These provisions were ruled inapplicable to people injured in crashes before June 11, 2019, when the law took effect. However, the court did not address other provisions of the law, particularly concerning the fee schedule for Medicare-covered treatments, occupational therapy, and rehabilitative training.

What’s at Stake?

The Michigan Department of Insurance and Financial Services (DIFS) maintains that the lower reimbursement rates introduced in 2021—set at 190% or 230% of what Medicare pays—continue to apply to claims for accidents that occurred before June 11, 2019. The insurers involved in the lawsuit argue that this stance subjects them to a no-win situation:

• If they comply with the department’s position, they risk fines and potential loss of their licenses.

• If they follow the court’s ruling and continue paying higher reimbursements, they face legal actions from claimants who may be denied benefits.

The insurers are seeking a declaratory judgment and injunction to prevent DIFS from penalizing them for higher reimbursements to healthcare providers treating patients injured before the law was enacted.

The Department’s Position

DIFS has maintained its role as a law enforcer and a protector of consumer rights. According to DIFS spokesperson Chelsea Lewis, the department’s actions reflect current laws and binding court decisions to balance cost savings for Michigan drivers and ensure continuity of care for accident survivors. However, insurers argue that the 2023 Andary vs. USAA Casualty Insurance Co. ruling set a clear precedent that entitlements to personal injury protection (PIP) benefits should be determined based on the laws in place at the time of the accident, not after.

Legislative Uncertainty

The lawsuit highlights ongoing uncertainty in the legislative landscape. While the Michigan Senate, now led by Democrats, has passed bills aimed at raising payments for long-term care in cases of severe accidents, the legislation has stalled in the state’s House of Representatives. This gridlock creates additional challenges for insurers, who are left navigating complex and sometimes contradictory directives on how to handle reimbursements and claims.

What This Means for Michigan Auto Insurers

The outcome of this lawsuit could have far-reaching consequences for auto insurers operating in Michigan. If the court sides with the insurance companies, it could reinforce the notion that retroactive applications of new reimbursement rates are invalid, protecting insurers from potential fines and legal penalties. However, if the court rules in favor of DIFS, insurers may face increased financial strain as they continue to juggle lower reimbursement rates and heightened regulatory scrutiny.

In the meantime, insurers should carefully monitor the developments in this case, review their current reimbursement practices, and consult legal counsel to ensure compliance with state directives and recent court rulings.

The ongoing legal battles surrounding Michigan’s 2019 auto insurance reforms are far from over. As insurers await further clarification from the courts, it is crucial to stay informed and be prepared for potential changes to the law. Maintaining compliance while navigating these uncertainties will be vital to minimizing risks and protecting your business.

For more information on how this lawsuit might impact your insurance operations, or if you need assistance navigating Michigan’s complex auto insurance regulations, please get in touch with David Bowen or Geoffrey D. Marshall.